The Zhitong Finance App learned that CICC released a research report saying that the weak cyclicality of the highway sector fundamentals has led to lower stock price volatility, and long-term performance growth and steady dividends have brought good yield levels, so the risk-to-benefit ratio of the highway sector is higher than other traditional high-dividend industries with strong cycles. The ratio of monthly returns to standard deviations is used to measure the return level corresponding to the risk per asset unit. The risk-return ratio of the highway sector in the past ten years was 0.14, and the risk-return ratio of the highway sector was higher than that of other traditional high-dividend industries, such as the coal, petroleum and petrochemical, banking, and steel sectors, which were 0.08, 0.08, 0.12, and 0.05, respectively. We recommend China Merchants Highway (001965.SZ), Yuexiu Transport Infrastructure (01052), Shandong Expressway (600350.SH), and focus on Shenzhen International (00152).

CICC's views are as follows:

Performance growth+steady dividends. The long-term yield of expressways is impressive and the volatility is low.

According to the bank's estimates, the 2013-2023 highway sector price index's annualized yield reached 8.9%, and the annual yield for the Shanghai and Shenzhen 300 was 2.8% during the same period. After considering the dividend yield, the cumulative dividend yield for the 2013-2023 highway sector was 98.24 billion yuan, accounting for 46.7% of the total net profit of the sector during the same period, accounting for 34.4% of the sector's total market value, and the average annual dividend yield for 2013-2023 was 6.2%. Without considering dividends and reinvestment income, the road sector's annualized return (dividend+stock price earnings) is about 15.1%. Furthermore, compared with the CITIC Tier 1 industry, highway volatility is at a low level. The 2013-2023 road monthly yield standard deviation was 6.7%, while the industry-wide average was 8.3%.

The road sector is ahead of other traditional high-dividend industries in terms of risk and return.

The bank uses the ratio of monthly returns to standard deviations to measure the level of return corresponding to the risk of different asset units. The risk-to-return ratio of the highway sector in the past ten years was 0.14, higher than the value of stock indices such as China Securities and the Shanghai and Shenzhen 300, but lower than the debt index and commodity index. Furthermore, the risk-return ratio of the highway sector is higher than that of other traditional high-dividend industries, such as the coal, petroleum and petrochemical, banking, and steel sectors, which are 0.08, 0.08, 0.12, and 0.05, respectively. The bank believes that the core reason is that highways have weak cyclical characteristics, and past performance growth has been more steady, so the growth of stock prices and the certainty of dividends are stronger than traditional high-dividend sectors with strong dividends. The bank believes that the allocation value of the highway sector is relatively prominent in high-dividend strategies.

The highway sector can counter equity and debt risks and optimize the Sharpe ratio.

The bank believes that as a physical asset that can generate stable and abundant cash flow, it can effectively diversify the risks of traditional 60/40 equity portfolios. According to the bank's estimates, adding the Expressway Index to the traditional equity portfolio and allocating shares, bonds, and the highway index at a ratio of 55:35:10, then the new portfolio can obtain a higher Sharp ratio in the 1/3/5/10 holding dimension, and the longer the holding period, the more obvious this advantage becomes.

Risk warning: Toll road policy changes, economic growth falls short of expectations, risk-free interest rates are rising.